ChevronTexaco Increases Target for Savings to $2.2 Billion

ChevronTexaco has increased its merger-related synergy target to $2.2 billion, an annual before-tax rate to be achieved by April 2003. The company also said it expects to meet its previously announced $1.8 billion annual synergy objective by October 2002, or six months ahead of schedule.

In a presentation to security analysts, Chairman and CEO Dave O'Reilly said, "In the eight months since completing our merger, ChevronTexaco moved swiftly and successfully to integrate its businesses and to put in motion aggressive plans to enhance upstream performance and improve downstream returns. One benefit is that we expect synergies to be at a $1.8 billion annual rate by October of this year, or six months earlier than our initial projection. And in the process we have been able to identify an additional $400 million in synergies we expect to capture by April 2003. Since announcing the merger in October 2000, we have almost doubled our initial synergy target.

"Taken together, the plans we have outlined are designed to achieve within two years, a 2 to 3 percent improvement in our return on capital employed," said O'Reilly, who also emphasized that the company's overarching objective is to be first among its peers in total stockholder return for the five-year period ending in 2004.

Vice Chairman for Upstream Peter Robertson noted that ChevronTexaco's upstream portfolio is expected to deliver competitive long-term production growth, and improved returns on capital employed. He reaffirmed that worldwide oil and gas production will increase at an expected compounded annual growth rate of 2.5 to 3 percent by 2006.

Robertson told analysts that the company was already strategically well positioned across the globe's major oil production areas, and will continue to expand its business by creating new entry options and by seeking to develop new core production areas. He also cited a rigorous global evaluation process that has optimized ChevronTexaco's exploration program. "Our enhanced capabilities are delivering success, notably the recent Tahiti discovery in the deepwater Gulf of Mexico." Robertson estimated that Tahiti holds 400 to 500 million barrels of recoverable oil reserves.

Robertson also spoke of plans to increase development of the company's considerable natural gas reserves. "We are building a global gas business," he said. "We plan to commercialize the huge Gorgon gas field offshore Australia where ChevronTexaco now has a major interest. We're also pursuing other gas-related opportunities including a gas-to-liquid facility in Nigeria, a liquefied natural gas facility in Angola and liquefied natural gas (LNG) regasification terminals in North America."